Tag: Germany

Friday, November 30, 2018

Daily Writing

10:14 AM

Today is the final trading day of November. Yesterday we exited our short US 10-year Treasury position as it is becoming clear that yields are struggling to keep their head over the 3.00% support level. Although the historical volatility of the PST exchange-traded instrument was within a tolerable range of 7.00% to 9.00%, the underlying narrative was struggling to hold up after Jerome Powell’s announcement on Wednesday that interest rates are inching closer to a range considered to be “neutral”.

We are focusing on outperforming the SPX benchmark. Our primary goal into the next year is focusing on exceeding this benchmark. Our methodology will focus on large-cap, high dividend U.S. equities. We expect portfolio allocation of U.S. equities to fall within 50 – 75%. At least 60% of portfolio allocation will consist of low beta assets, aiming for below average correlation to the S&P 500 benchmark.

Tuesday, November 27, 2018

Daily Writing

8:58 AM

Gold remains rangebound hovering around the $1200 spot price. The price of gold has not moved outside of $1200 to $1235 per ounce since the middle of August.

Oil has started to hold ground at $51.00/barrel. We found an informative clip assessing the current oil pricing situation. In the current environment, which countries have the most impact on the price of oil? Which events or types of events have the most significant impact on the global price of oil?

German bunds move higher, as the yield on the 10-year bund continues to move lower. How are German and other European equities performing? What determines the price of German government bonds? How much impact does the European Central Bank (ECB) policy have on the domestic monetary policy of sovereign European states?

Tuesday, November 6, 2018

Daily Writing

9:21 AM

The U.S. mid-term elections take place today. The outcome is uncertain but there is a strong possibility that the Democrats retake the house of representatives. This opens the door for Trump impeachment in 2018. The markets have not fully priced in a democratic agenda for 2019.

Bond yields reflect the health of a state’s balance sheet. Is this a fair way to approach government bond yields? Brazil’s 10-year government bond currently yields more than 10.00%. Will we see lower yields as newly elected right-wing candidate Jair Bolsonaro’s policies begin to take root in Brazil? Bolsonaro is widely viewed as a right-wing fascist who will be willing to sacrifice capitalism in favor of dictatorship and “rule of law”[1]. At 0.42% Germany’s balance sheet looks quite “healthy”.

Most Asian bond yields are ridiculously low. Japanese Government Bonds (JGB’s) currently yield 0.12%. Isn’t this effectively a negative yield? Why would anyone buy Japanese bonds? (No one does apparently).[2]

The price of WTI crude has dropped considerably since the start of October. What could be the cause of this? Is Saudi Arabia facing heightened pressure to increase demand after the Khashoggi incident? What is the impact of newly enacted U.S. sanctions against Iran on global oil prices?

Volatility continues to tick downward, with the CBOE Volatility Index falling below 20.00 for the first time since September 2018. However, things can change drastically tomorrow following the results of the mid-term election. Our thinking is that the market does not like surprises, if the market is surprised by the election outcome (i.e. Republican victory in the house race), then we could see a considerable spike higher in volatility.

Yesterday European Union Ministers called on Italy’s populist government on Monday to engage in talks with Brussels on a revised draft budget for 2019, backing the European Commission’s view that the plans violate previous commitments by Rome to shrink the deficit next year. The populist Italian government does not view the EU’s terms favorably. What does Italy want to include in its budget that the EU is opposed to? Italy wants to include three things in its budget that fall outside of EU rules: flat tax, reduced retirement age, and citizens’ income. In its current form, Italy’s 2019 budget deficit will balloon to 2.4% of GDP, well outside the 0.8% cap mandated by EU authorities. Things could get ugly here if the issue is not resolved. We are following the deeper impact on the Euro.